Sulzer’s Cardo Purchase Weighs on Profit From Booming Pump Sales
Sulzer AG (SUN), a Swiss pump maker, said charges related to its acquisition of Cardo Flow Solutions and the introduction of new products weighed on profitability in the first half even as sales rose 9.2 percent.
Sulzer reported first-half earnings before interest and taxes of 193.4 million Swiss francs ($197.4 million), missing the 203.1 million-franc average of seven analyst estimates compiled by Bloomberg. Sales of 1.92 billion Swiss francs beat the estimate of 1.89 billion francs, driven by growth in oil and gas industry orders in North America and Russia.
Acquisition charges and weaker margins at wastewater pump- maker Cardo, which Sulzer acquired last year, crimped profit at the pumps division, which supplies half of the company’s revenue, CEO Klaus Stahlmann said. Ebit in the division fell 1.6 percent from a year earlier, while a sales gain of 32 percent was adjusted down to 8.9 percent for acquisition and currency effects, Sulzer said today in a statement.
“Cardo has a little bit less service business that what we originally had in the total pump division,” Stahlmann said in an interview. “Strategy-wise we want to concentrate and focus on developing the service business.”
Sulzer declined 0.7 percent to 120 francs as of 9:07 a.m. in Swiss trading, paring the stock’s gain this year to 20 percent.
Sales at Cardo, acquired from Assa Abloy AB for 852 million francs, are “heavily loaded toward the second half of the year,” as most of its utility customers buy then, the CEO said.
“I don’t have a worry if I look at the business itself over the whole year that it will be a profitable business,” he said. The integration of the purchase with Sulzer’s operations is done, he said.
Sulzer reiterated its forecast for order intake and sales to increase by a high single-digit percentage for the full year, with double-digit profit growth.
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